Policy paper

Machine Games Duty: increasing the rate on higher stake and prize machines

Published 29 October 2026

Who is likely to be affected 

Businesses that provide dutiable machine games on higher stake gaming machines, particularly adult gaming centres, bingo premises, betting shops and casinos.  

General description of the measure 

This measure will increase the rate of Machine Games Duty (MGD) from 20% to 25% for machine games with stakes over £1 or prizes over £100, from 1 April 2027.

To implement this change, this measure will amend the stake and prize thresholds used to determine the rates of MGD, so that dutiable gaming machines with a maximum charge to play of more than £1 or a maximum prize of more than £100 will fall within the higher rate category for MGD and be subject to a duty rate of 25%, instead of the standard rate of 20%. The changes will apply from 1 April 2027. 

Policy objective 

This measure will make sure that higher stake and higher prize gaming machines, which are more associated with gambling harm, are subject to a higher rate of MGD, while maintaining the existing duty treatment for lower stake gaming machines.

The measure supports a fair and sustainable gambling tax system by better aligning MGD rates with the characteristics of different gaming machines. 

Background to the measure 

MGD is charged on the net takings from dutiable machine games. The current regime has three rates: a 5% lower rate, a 20% standard rate and a 25% higher rate. The rate that applies depends on whether a machine is classified as a Type 1, Type 2 or Type 3 machine.  

Under the current rules, a machine is a Type 1 machine if the highest charge payable to play does not exceed 20 pence and the maximum prize does not exceed £10. Type 1 machines are subject to the lower rate of MGD.

A machine is a Type 2 machine if the highest charge payable to play does not exceed £5 and the machine is not a Type 1 machine. Type 2 machines are subject to the standard rate of MGD. Machines that do not fall within either the Type 1 or Type 2 definition are Type 3 machines and are subject to the higher rate of MGD.  

Detailed proposal 

Operative date 

The revised stake and prize thresholds will have effect for MGD from 1 April 2027.  

Current law  

The current law is contained in Schedule 24 to the Finance Act 2012. Paragraph 5 defines Type 1, Type 2 and Type 3 machines. Paragraph 6 links those machine types to the lower, standard, and higher rates of MGD. Paragraph 9 sets the rates of duty and provides for the calculation of duty where a rate changes during an accounting period.  

Proposed revisions 

Legislation in Finance Bill 2026-27 will amend paragraph 5(3) of Schedule 24 to the Finance Act 2012, so that a machine will be a Type 2 machine where it is not a Type 1 machine and both of the following conditions are met:  

• the highest charge payable for playing a dutiable game on the machine does not exceed £1

• the maximum amount that can be won from playing a dutiable game on the machine does not exceed £100

Machines that do not fall within the Type 1 or revised Type 2 definitions will continue to be Type 3 machines. This will bring machines with a stake exceeding £1, a prize exceeding £100, or both, within Type 3 and make their takings subject to the higher rate of MGD.   

The existing Type 1 definition and residual Type 3 definition will otherwise be preserved. The Treasury’s order-making power in paragraph 5(5) will be amended to allow the stake and prize limits to be varied up or down.

Summary of impacts 

Exchequer impact (£million) 

2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031	2031 to 2032
—	+135	+130	+130	+130	+130

These figures are set out in Table 6.1 of Budget 2026 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2026.

Economic impact 

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families 

The measure does not directly affect individuals because MGD is paid by businesses that provide dutiable machine games. This measure will impact individuals if the duty rate increase is passed on to them through changes in returns to players.

In response, some individuals could choose to gamble less, or switch to alternative gambling activities. The extent of any pass-through to customers or wider effects on households and families is uncertain and will depend on business decisions and behavioural responses.  

The measure is not expected to have a direct impact on family formation, stability or breakdown.  

This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC as the change does not directly impact them. 

Equalities impacts 

This measure affects businesses, though there may be indirect impacts to individuals who gamble through machine games. It may apply to individuals irrespective of protected characteristics, and any protected groups that are overrepresented could therefore be disproportionately impacted. 

HMRC does not hold data that it can use to assess whether there are any disproportionate impacts to protected groups. However, it is estimated that males are slightly more likely to use machine games. Additionally, the age group estimated to be most likely to use machine games is 18 to 24. 

Administrative impact on business including civil society organisations 

The measure is expected to have a negligible administrative impact on businesses offering higher stake and higher prize machines, particularly adult gaming centres, bingo premises, betting shops and casinos. Around 5,100 MGD operators offering these types of machines are estimated to be affected by this measure, impacting approximately 12,400 active premises. 

These businesses will see an increase in their duty bills. One-off costs will include familiarisation with the changes and updating systems to reflect the revised MGD rates. For the threshold measure, businesses will also need to make sure that machines are correctly categorised under the revised Type 2 and Type 3 stake and prize limits. No ongoing administrative costs are expected. 

Businesses will continue to register, submit quarterly returns and make payments through the existing MGD service. As the existing return refers to the lower, standard and higher rates rather than displaying the underlying percentage rates, no substantive changes to the return process are currently expected. 

This measure is not expected to impact civil society organisations. 

This measure is expected to impact businesses’ experience of dealing with HMRC as the change will require them to update their processes to comply with the change in duty. HMRC will provide clear guidance and communication of the change. 

Operational impact (£million) (HMRC or other) 

HMRC will need to make minor changes to IT systems to deliver this change. Any associated costs are expected to be minimal, although estimates are still being refined. 

Other impacts 

Other impacts have been considered and none have been identified.   

Monitoring and evaluation 

Consideration will be given to monitoring or evaluating the expected exchequer impacts of the policy after 2 years of monitoring data have been analysed and collected.  

Further advice 

If you have any questions about this change, contact machinegamesduty@hmrc.gov.uk.